Moderna CEO Bancel proposes four-fold increase in Covid-19 vaccine price citing reduced demand

Moderna will raise the price of its Covid-19 vaccine by more than 400%, from $26 a dose to $130, as the U.S. public health emergency for Covid-19 ends on May 11th. Stéphane Bancel, the CEO of Moderna, cited lower consumer demand as one of several reasons for raising the price. However, this reasoning is odd, as higher prices don’t reflect lower demand; instead, they function as a sub-optimal market. While the bump in price will not directly affect most Americans, as most will not pay anything out-of-pocket for their vaccine, purchasers such as insurers and pharmacy benefit managers in the supply chain will pay for it. When payers spend more on healthcare services and technologies, they eventually pass this on to their customers through higher premiums. Moderna expects a 90% vaccine demand reduction this autumn when the next Covid-19 booster campaign commences. Bancel stated that the higher price is a reflection of value. Vaccines have saved many lives and prevented many more hospitalizations. However, it’s a different story for those at low risk of hospitalization and death following an infection. Presently, the cost per Quality-Adjusted-Life-Year (QALY) gained for this group is $94,000, which would increase substantially with a price rise, making the vaccine ineffective. In conclusion, the dramatic price increase seems problematic against the backdrop of a significant drop in demand. It points to a price range within which a vaccine is cost-effective for some but not for others, suggesting the need to stratify sub-populations when calculating a product’s value.